How to Secure a Personal Loan with Poor Credit

Poor credit is widely considered a credit score under 619, although there is some discrepancy associated with exactly where the line is between fair credit and poor credit. Having poor credit can make it very difficult to get a loan or to get good rates.

Lenders may be reluctant to lend to you as a result of your bad borrowing history, so you will have to do a considerable amount of research in most cases in order to secure a personal loan. There are, however, a few things you can try:

• Consider going to local credit unions or banks. Your local establishment may have less stringent guidelines for in-house loans than many of the large national banks. You may be able to explain your bad credit to them with documentation, such as proof that a medical emergency caused the issue, and they may have more leeway to forgive.
• Look for a secured loan. Sometimes a lender will allow you to take a loan if you put up collateral, such as a car or other valuable possessions. While this may not be common, there may be a bank or lender out there who is willing.
• Explore sub-prime lenders. Sub-prime lenders will issue loans to people with less than optimal credit, but normally at very high interest rates. This can be a poor long term financial decision since the high interest payments may make it difficult for you to keep up with paying on time, thus putting you back into a bad financial situation- but if you have no other option, you should be able to find someone who will lend money to you online or on the Internet.
• Consider a peer-to-peer lending network. Online networks or lending clubs such as Lending Club.com match borrowers who need loans with investors who want to earn higher rates of interest than they could earn in some mutual funds or other types of investments. You may be able to get a loan funded through lending club even when a traditional bank will not take you.
• Ask a friend or relative to co-sign. This is a good option, as you can capitalize on the good credit of your co-signer. However, you will need to find someone willing to put their name on the loan for you. Remember that if you do not pay the loan, the cosigner will be stuck with it, be responsible and don't abuse their trust.

Improving Your Credit

One of the best things to do if you want to get a loan and secure your long term financial future, is to take steps to improve your credit score. There are several ways to do this including:

• Pay down debt. Lenders like to see your credit utilization, or the amount of credit you have used, at around 30 percent of the credit available to you.
• Make all your payments on time. Your payment history makes up 35 percent of your score.
• Don't open new cards and don't close old ones. The average age of your credit history is important as well in determining your credit score; the older the credit history, the better. 

With a little time and some responsible borrowing behavior, you will be able to improve your credit score and qualify for loans at much more advantageous rates.